Recent Bank Fines:

1. In December 2022 the FCA fined Santander £107.7 million for serious breaches relating to money laundering and financial crime regulations.

2. In December 2022 the FCA fined TSB Bank £29.75 million for serious breaches relating to risk management regulations.

3. In December 2021 Southwark Crown Court fined NatWest £264.7 million for serious breaches relating to money laundering and financial crime regulations.

4. In December 2021 the FCA fined HSBC Bank £63.9 million for serious breaches relating to money laundering and financial crime regulations.

Rationale:
For many years UK Banks have not adheard to the regulations relating to money laundering and terroirst financing. All to often banks have been willing to ignore their legal obligations to ensure that financial transactions through their accounts are lawful and legal. This has allowed 'boiler room scams' and investment fraudsters, to operate almost completley unchallenged. Whilst the banks have no knowledge weather or not these firms are invloved in raising money for potential terrorist activity, or other serious criminal activity other than fraud. This gives rise for extreme concern that UK banks have allowed nefarious financial activity to continue unchallenegd, resulting in thousands of UK investors to lose money.

The UK anti-money laundering legislation is dictated by the Proceeds of Crime Act 2002 (POCA), the Terrorism Act 2000 and the Money Laundering, Terrorist Financing and Transfer of Funds 2017. The UK is a member of FATF and, accordingly, the UK anti-money laundering legislation meets FATF’s global standards. Similarly, while the UK left the EU on January 31, 2020, it is committed to transposing the AML/CFT standards set out in EU’s 5th and 6th anti-money laundering directives (AMLD). At the risk of noncompliance penalties and fines, firms in the UK should understand UK anti-money laundering laws, be familiar with the relevant financial authorities and implement a suitable compliance policy.

UK Anti Money Laundering Act Authorities:

FCA:

The Financial Conduct Authority is the UK’s main financial services regulator with authority over banks, building societies, credit unions and other firms engaging in financial activities. Established in 2012 under the Financial Services Act, the FCA replaced the Financial Services Authority (FSA) and has a mandate to maintain the safety of the UK’s financial system and its financial institutions. The FCA oversees compliance with AML regulations in the UK and has the power to investigate money laundering and terrorism financing offenses in conjunction with other law enforcement agencies and authorities, such as the Crown Prosecution Service (CPS). All banks and financial institutions in the UK must register with the FCA.

HMRC:

His Majesty’s Revenue and Customs shares the responsibility to investigate money laundering offenses with the FCA. HMRC issues guidance on anti-money laundering in the UK, including compliance requirements for customer due diligence and transaction monitoring and the need to issue an anti-money laundering policy statement. In addition to the FCA and HMRC, the power to enforce money laundering regulations in the UK is shared by the National Crime Agency (NCA) and the Serious Fraud Office (SFO), both of which have power of arrest and can seek warrants and court orders. UK AML/CFT authorities also have the power to freeze and confiscate assets that they suspect are involved in money laundering, terrorism financing or other criminal activities.

Anti-Money Laundering/Combating the Financing of Terrorism (AML/CFT):

Proceeds of Crime Act:

Introduced in 2002, POCA is the UK’s primary AML regulation and defines the offenses that constitute money laundering. Those activities cover the perpetration and facilitation of money laundering and the acquisition or distributions of its criminal proceeds. Under POCA, banks and financial institutions must put appropriate AML controls in place to detect money laundering activities: these include customer due diligence and transaction monitoring measures, as well as a range of reporting requirements.

The Terrorism Act:

While POCA focuses on money laundering offenses, the Terrorism Act imposes counter financing of terrorism obligations on banks and financial institutions, which also include customer due diligence, transaction monitoring and reporting obligations. The Terrorism Act was first introduced in 2000 but was amended by the Anti-Terrorism, Crime and Security Act 2001, the Terrorism Act 2006 and the Terrorism Act 2000 and Proceeds of Crime Act 2002 (Amendment) Regulations 2007).

UK AML Regulations 2017:

Beyond POCA and the Terrorism Act, the next most important AML/CFT legislation is the Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017. The MLR 2017 transposes the obligations set out in the EU’s 5th AMLD, tightening controls in the private sector and introducing the need for firms to implement a written AML/CFT risk assessment.

Money Laundering Regulations 2019:

The Money Laundering and Terrorist Financing Regulations 2019 implemented the EU Fifth Money Laundering Directive in the UK, and came into effect on 10 January 2020.

This legislation extends the scope of regulated industries and changes the way customer due diligence and enhanced due diligence is conducted.

UK AML Sanctions Regime:

Under the Brexit Withdrawal Agreement, EU sanctions will apply in the UK until December 31, 2020. To deal with the transition from the EU’s sanctions regime to its new regime, the UK passed the Sanctions and Anti Money Laundering Act (SAMLA) in 2018. The act gives the UK government powers to lift and impose sanctions in line with its ongoing international obligations and to devise new targeted sanctions as part of its own regime. The powers conferred by SAMLA set a lower requirement for the imposition of sanctions and allow the UK to freeze the assets of entities and individuals. The broader scope of the sanctions powers available under SAMLA has led to speculation that the UK might implement a more extensive sanctions regime. In particular, the UK may target Russia with Magnitsky-style sanctions designed to punish human rights violations and as a response to the Salisbury poisoning incident in 2018.

Consequences of Noncompliance with UK CFT / AML Regulations:

Noncompliance with the UK’s CFT / AML regulations may result in financial penalties or up to 14 years imprisonment depending on the nature and severity of the offense. The FCA has the authority to wind up or restrict the operations of firms that are found guilty of wrongdoing and may also recover funds and assets that are involved in money laundering offenses via court or civil proceedings. AML compliance breaches in the UK may also result in significant reputational damage for the firms involved.

How to Comply with UK CFT / AML Regulations:

In order to comply with the CFT / AML regulations set out in POCA, the Terrorism Act and MLR 2017, banks and financial institutions must take a risk-based approach to the threats they face. In practice, firms should perform AML risk assessments of their customers and the business sectors in which they operate and use that information to implement a proportionate response.

An effective UK AML policy that complies to the money laundering act should involve the following measures:

AML Program: Firms must put in place an AML/CFT compliance program that includes customer due diligence and transaction monitoring measures in line with their regulatory obligations. Their AML program should also screen for adverse media stories, politically exposed person (PEP) status and sanctions lists.

Reporting Obligations: Firms must submit suspicious activity reports (SAR) to the National Crime Agency when potential money laundering activity is detected.

Money Laundering Reporting Officer: An individual must be appointed as Money Laundering Reporting Officer to oversee their firm’s AML compliance program. The MLRO should have sufficient authority and knowledge of money laundering risks to carry out their duties effectively.

AML/CFT Training: Firms should ensure their AML/CFT employees have the knowledge and resources they need by implementing an ongoing training schedule and anticipating upcoming regulatory changes.

Legislation Compliance Scrutiny 'LCS':
After nearly 12 years operating in the alternative investment risk management sector, it is clear to us that most UK banks have not been operating in compliance of all aformentioned legislation, this has led to many of our clients losing thousands, sometimes hundreds of thosuands of pounds. If the banks were acting in full compliance of all legislation they could have used their powers to prevent funds being paid, or to reclaim funds once it was eststablsihed that the investment offerings payments related to, were not as described, or indeed were totally non-existant. It should be noted that there is no time limit on banks ability to exercise their powers to require 'proof of credit', and to reclaim funds. The term 'proof of credit' is where the bank requires the recipient of funds to prove they have/had a lawful and legitimate reason for receiving the funds in question.

Our strategy with 'LCS' is to make legal representations to banks and to insist that they are now required to investigate all payments made by our clients with a view to reclaiming said funds, on behalf of our clients, from recipient banks in line with all current and historical legislation. We are not a claims management firm and clients should not confuse our 'LCS' strategy with what was known as 'PPI claims' against the banks. 'LCS' is very different as it will require high-level legal representation with the potential of litigation, so as to focus on the banks legal obligations as stipulated within the regulations and legislation listed above. We will directly highlight to the banks their legal obligations and the very serious implications for having not met those legal obligations, as well as the required financial remedy for our clients.